Hotels & Hospitality Hotel Intelligence Munich 2013
Knowledge, strategy results
2 Hotel Intelligence: Munich
Snapshot Due to its strong local economy, its standing as an international trade fair hub and accommodating Germany’s second largest airport, Munich is recognized as the powerhouse of Southern Germany.
A positive development in demand patterns, together with the country’s highest entry barriers for new supply, makes Munich one of the most sought-after hotel markets in Europe, with many operators and investors seeking to establish themselves in the city.
Munich: Trade fair participants and events 2002-2012 3.0
30
2.4
24
1.8
18
1.2
12
0.6
6
0.0
Economy
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Participants
Events
With a well-balanced demand mix and a high share of international overnights, Munich is Germany’s best performing hotel market.
Trade fair & congress
Participants (in million)
Munich is the second most visited city countrywide and a preferred tourist destination on an international level, able to secure a high share of corporate demand and offering a large variety of leisure attractions, including the famous Oktoberfest.
0
Events
Sources: Munich Trade Fair, Jones Lang LaSalle Hotels & Hospitality
Munich benefits from numerous global companies based in the city, including the headquarters of six DAX-30 listed corporations which attract a consistently high flow of business travellers. Among the major industries located in the city are financial services, insurance and private equity, car manufacturing, life sciences and publishing. According to Mercer’s quality of living study, Munich ranks among the world’s preferred places to live and in 2012 occupied 4th place for the second year running after Vienna, Zurich and Auckland. Munich shows the highest purchasing power per capita among Germany’s key destinations and also easily outperforms the German average in terms of level of unemployment (5.4% compared to 7.4% nation-wide in 2012)
Munich is a popular trade fair destination with the Messe München International (MMI) ranking 5th in Germany in terms of exhibition space. The city hosts a total of 14 international trade fairs, including the blockbuster fairs Bauma, BAU, ISPO and Expo Real. Munich trade fair, together with the adjoining congress centre, counted a total of 245 events and almost 1.8 million visitors in 2012. The trade fair cycle runs with the blockbuster fairs BAU and Bauma, taking place every two and three years, respectively. The construction of two additional halls is scheduled for 2016, adding some 20,000 sq. m. to existing facilities and is anticipated to further foster trade fair demand to the city. Local hoteliers can capitalize on peak trade fair periods by charging premium rates, further supporting Munich’s superior trading performance.
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Hotel Intelligence: Munich 3
Airport
Hotel supply
Munich: Airport passenger volume 2002 - YTD June 2013
Munich: Hotel supply 2002 - June 2013
40
45
20 15 10 5
210 140
15 70 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Passenger Volume
YTD YTD Jun Jun 12 13
Sources: Arbeitsgemeinschaft Deutscher Verkehrsflughäfen (ADV), Jones
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jun 13
Establishments
Beds (in '000s)
280
25
Establishments
Passengers (in million)
350
30
0
60
420
35
0
Beds
Sources: Statistical Office Munich, Jones Lang LaSalle Hotels & Hospitality
Lang LaSalle Hotels & Hospitality
With around 100 airlines serving over 240 destinations worldwide, Munich Airport is among the six busiest airports in Europe and represents Germany’s key transportation hub after Frankfurt. With a total volume of more than 38 million passengers (+1.6% year-on-year), 2012 represented the airport’s 3rd consecutive record year. Showing an increase in passenger numbers of 4.7% between 2002 and 2012, it represents Germany’s second fastest growing airport after Berlin. With the airport likely to reach its capacity in the short to medium term, a new satellite terminal, which will increase capacity by an additional 11 million per year, is already under construction and is scheduled to start operating in 2015. A third runway is also in the planning stage. Initial plans, however, were rejected in a public referendum in 2012 and a final decision for the development is yet to be made.
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As at June 2013, Munich comprised accommodation establishments with 58,975 beds.
394
Overall, hotel supply has shown only marginal growth in the past decade, displaying a CAGR of 1.2% in the number of establishments and 3.9% in the number of beds between 2002 and 2012. This is mainly due to the scarcity of land and conversion assets available in central locations. Many hotels entering the market in the past decade were situated in more de-centralised locations, with the areas surrounding the airport and trade fair representing the core development areas. However, the supply pipeline in Munich is expected to increase in the short term, with ten hotel projects currently under construction and another ten in the planning stage. The majority of the hotels still in the planning stage will benefit from central locations situated within Munich’s inner ring road. They are also mainly positioned in the budget and midscale segments, leaving room for the development of 5-star assets in prime locations.
4 Hotel Intelligence: Munich
Hotel demand
Top feeder markets Munich: Nationality mix by overnights 2012
12
6
10
5
8
4
6
3
4
2
2
1
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Overnights
Arrivals
YTD YTD Jun Jun 12 13
11.8%
Arrivals (in million)
Overnights (in million)
Munich: Hotel demand 2002 - YTD June 2013
0
25.3%
8.8%
7.8%
1.9% 2.2% 2.4%
7.5%
3.1% 3.2% 3.4%
7.4% 3.8%
5.2%
6.1%
USA Italy Great Britain Gulf States Russia Switzerland Austria Spain Japan France China incl. Hong Kong Netherlands Australia Brasil Others
Sources: Statistical Office Munich, Jones Lang LaSalle Hotels & Hospitality
Sources: Statistical Office Munich, Jones Lang LaSalle Hotels & Hospitality
Owing to a broad spectrum of demand generators, Munich benefits from a well-balanced demand mix, which is almost equally split between business and leisure travellers and subject to very limited fluctuations throughout the week and year.
With a total share of 47.8% in overnights generated by international guests, Munich continues to represent Germany’s most international destination in 2012.
Munich counted almost 6.1 million arrivals and 12.4 million overnight stays in all accommodation establishments in 2012, representing the 9th consecutive record year and a year-on-year increase of 3.4% and 5.3%, respectively. In the past decade, Munich has seen a steady increase in arrivals and overnights, both growing by 5.8% on average per annum between 2002 and 2012. As at YTD June 2013, the positive trend continued, with an increase in arrivals and overnights of 5.6% and 7.4%, respectively, primarily driven by the strong trade fair cycle.
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The most important international source markets are the USA (15.8% of all international overnights), Italy (11.8%), Great Britain (10.5%), the Gulf States (10.0%) and Russia (9.9%). Particularly noteworthy is the considerable increase in overnights seen from Russian guests (+31.0% on average per annum between 2010 and 2012) and the Gulf States (+10.2% on average per annum from 20102012), with the latter regularly visiting Munich on a long stay basis during the summer months.
Hotel Intelligence: Munich 5
Trading performance
Hotel market outlook
200
100%
180
90%
160
80%
140
70%
120
60%
100
50%
80
40%
60
30%
40
20%
20
10%
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012
ARR (EUR)
RevPAR (EUR)
YTD YTD Jun Jun 2012 2013
Occupancy
ARR / RevPAR in EUR
Munich: Hotel trading performance 2002 - YTD June 2013
Although hotel supply is expected to grow in the short term, we anticipate that Munich will continue to benefit from its healthy demand mix and a rise in the number of less price-sensitive international guests, allowing local hoteliers to charge higher rates in the future. In particular the city’s standing as an international trade fair and congress destination will drive increasing demand from higher yielding travellers going forward.
0%
Occupancy (%)
*Change in Set Sources: STR Global, Jones Lang LaSalle Hotels & Hospitality
The city’s strong and diverse demand mix, which is almost equally split between business and leisure travellers, a high share of international guests as well as peak demand seasons during Oktoberfest and trade fair periods, have led to Munich’s position as Germany’s best performing hotel market. In 2012, Munich showed the highest RevPAR in Germany, reaching EUR 132 (+7.9% year-on-year). This positive development is primarily driven by strong growth in average room rates (2002-2012 CAGR +6.9%). This trend continued in 2013 when Munich’s 4- and 5star hotels showed an increase in ARR of 10.8% as at YTD June compared to the same period last year, which can partly be explained by the strong trade fair cycle in 2013.
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With the airport extension underway and the construction of a third runway expected to be approved in the long run, Munich will remain one of the most important transportation hubs in Germany and internationally Due to Munich’s strong and very stable trading performance, the city will continue to be one of Europe’s most sought-after destinations for operators and investors looking to establish themselves in the European hotel market.
6 Hotel Intelligence: Munich
Appendix 1: Munich hotel developments Munich Hotel Developments (as at August 2013) Hotel
Location
Rooms Grade
Due date
Recently Opened Ibis München Süd Hotel
Tegernseer Landstrasse 143
133
2
Q2-12
Hotusa Eurostars Book Hotel
Schwanthalerstrasse 42-44
201
4
Q3-12
angelo Hotel Munich Westpark
Albert-Roßhaupter-Str. 41
207
4
Q1-13
Pullman Munich (Extension, former Renaissance) Theodor-Dormbat-Strasse 4
70
4
Q1-13
McDreams Hotel
93
1
Q1-13
4
Q4-13
Trade Fair Munich
Total Rooms Recently Opened
704
New Developments 2013 Proposed / Under Construction Grand City / Wyndham Hotel project
Landsberger Str. 63
Total Rooms 2013
250 250
New Developments 2014 Proposed / Under Construction Ramada Hotel project Munich Trade Fair
Olof-Palme-Strasse / Opposite Trade Fair Entrance West
331
4 Q1-14
H2 Hotel project Munich Trade Fair
Olof-Palme-Strasse / Opposite Trade Fair Entrance West
205
2 Q1-14
Ibis budget Munich Airport Erding
Johann-Auer-Strasse
100
1 Q2-14
Adagio Access Aparthotel
Moosacher Strasse
160
3 Q3-14
Ibis budget
Moosacher Strasse
162
1 Q3-14
Relexa Hotel Schwanthaler Strasse
Schwanthaler Strasse / Paul-Heyse-Strasse
121
4 Q3-14
Total Rooms 2014
1,079
New Developments 2015 Proposed / Under Construction Aloft
Bayerstrasse 35-37 / Central Station
Total Rooms 2015 Total Rooms Proposed / Under Construction 2013 - 2015 Source: Jones Lang LaSalle Hotels & Hospitality
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331 331 1,660
4 Q2-15
Hotel Intelligence: Munich 7
Appendix 2: Munich infrastructure developments Munich Infrastructure Developments (as at August 2013) Under construction Munich Airport
Tram Line Extension
Proposed / Approved Tram Line Extension Airport Express
Second Suburban Train Tunnel
Reconstruction of Munich Central Station
Munich Trade Fair
Construction works on the extension of Terminal 2 started in April 2012. With the development of an extra building, comprising two passenger levels with 52 gates and 27 aircraft parking positions, passenger capacity is said to be increased by 11 million to 61 million by 2015. In addition to the new connections to Parkstadt Schwabing and St. Emmeram, tram line 19 represents Munich's third extension project. The line will extend the existing connection to Pasinger Bahnhof (from St.-Veit-Strasse to Pasinger Marienplatz) thus improving the interchange with other public transportation. Completion is expected by late 2013. There are plans for a new tram line from Max-Weber-Platz to S-Bahnhof Berg am Laim in Eastern Munich. Licensing procedures are planned to start in late 2013. To improve accessibility by reducing travel time, public transport between the airport and the city is also being evaluated, with the main goal being to reduce travel time to the airport from the main train station. However, a final decision has not yet been made with regard to an express connection. In order to relieve the existing suburban route from the present high level of demand and to improve connectivity, there exist plans for a second suburban train tunnel to run through the inner city. The plan is to build a 7.5 km tunnel, parallel to the existing suburban tunnel, which will serve the three primary stations of Hauptbahnhof, Marienplatz and Ostbahnhof to Leuchtenbergring. Approval from the planning authorities of the Bavarian Parliament was granted in April 2010. At the end of 2012, funding issues were solved and it is expected that construction works will start at the end of 2014. Completion is not expected prior to 2019. There are plans for the reconstruction of a new entrance hall at the central station. However, the start of construction and completion are dependent on the development of the second suburban train tunnel, as the Deutsche Bahn is intending to combine the two construction sites. The beginning of construction work for two new exhibition halls is scheduled for 2016 with completion not expected before 2018. These areas would increase capacity by approximately 20,000 sq. m. to 200,000 sq. m.
Source: Jones Lang LaSalle Hotels & Hospitality
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Hotel Intelligence: Munich
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists pro-vide independent and expert advice to clients, backed by industry-leading research.
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